Welcome, everyone. Welcome to Bachem's 2024 Capital Markets Day. I'm very happy to see a lot of faces, some familiar, some new here with us in Zurich. We have about 50 people on site registered. We have about 40 people joining us via Zoom today. And hope that everything works out on the technical side with this hybrid event. My name is Daniel Grotzky. I'm responsible for communications at Bachem. We have an exciting agenda today. I'll hand over in a moment to our chairman, Kuno Sommer, for a few introductory remarks. And then Thomas Meier will give us an update on how Bachem is progressing on its mission and our strategy. Torsten Wöhr, our Chief Commercial Officer, will share his views on the market development. And then Günther Leudl, the CTO, will speak to capacity expansion and innovation.
Alain Schaffter will then also have a brief part regarding financing to share with you. Thomas will wrap it all up. We should also have adequate time for Q&A. Time-wise, we estimate presentations to go between maybe 45 minutes to an hour, depending on how enthusiastic all the speakers are regarding peptides and oligonucleotides. We love them very dearly, so we can spend a lot of time speaking about them. We will then have about an hour of Q&A time, wrapping it up around 4:00 P.M. CET. For those of you who are with us here in the room, we'll also have a nice Aperol Spritz following, so you can mingle with each other as well. Questions during Q&A can then also come either through the Q&A function on the chat, on the Zoom, or here in the audience.
Without any further ado, I am very happy to ask our Chairman, Kuno Sommer, up to the stage for his introduction. Kuno, over to you.
Yes, just.
Yeah, stuff.
Hi, welcome, everybody. Thanks for taking the time. I'm only allowed to show you one slide. They don't give me more minutes, and I'm only allowed to give some introductory remarks. I will do a bit more. When you look back in March, we told you this industry, the whole pharma industry is potentially facing some disruptive changes: GLP-1, diabetes, obesity, weight loss. You know all about it, and I think we are in the middle of it. We are in the middle of it. You will hear more about it today by Torsten, but the market dynamics are stronger every day, and that goes together with capacity needs every day. Our strategic vision basically remains unchanged, and this also, Thomas, we'll elaborate on that. What is important, and you know that, that the capacity is. I mean, it's normally a pharma company will not talk about the building.
But in our situation, it's a bit special. We know the big step is this famous Building K. And today, we will do a deeper dive on that by Günther Leudl, which we know is always risky if we do a deeper dive with you because you will then all kind of make reports on it. But we want to be totally transparent, and we want that you really understand what this means. At the same time, we will also talk about innovation. Our true USP against competitors in the competitive environment, and there are competitors. There will be more competitors, is innovation. And this is the edge we want to further build, and we are working on it. Also, there we will give a deeper dive. Finance is a topic, but not a big one at the moment. We know how to finance.
That's not the issue at the moment. So net net, we are very privileged. I mean, we have long-term commitments of strong customers. I mean, not many industries have that. So net net, it's all about execution. And with this, I hand over to Thomas.
Turn this off.
Thank you.
There we go, so let's talk about what Bachem is and what is important to us, and hopefully, that makes sense for your daily work and helps you to do a good job. Bachem is clearly a pharma service company. We are in the universe of pharma services, and within that universe, we are a contract development and manufacturing organization, that is, we produce products, actually pharmaceutical ingredients for pharma companies. This all is based on our key knowledge, and that's how to produce peptides and oligonucleotides, and we want to do that with our customers for a long-term relationship. That means we carry the molecule with biotech from the early days until commercial products or with the large pharma while they are developing into really, really big products for a very, very long time.
Those are products that stay on the market, some of them even after becoming generic with the innovators. This all is based on chemical synthesis. We don't do any recombinant work. We don't do any expression. It is chemical synthesis. That's the core competence that's in the company. And with all that together, we manufactured revenues of CHF 577.3 million in 2023. And we had about 2,000 colleagues working for Bachem globally day to day. Now, I mentioned we work in peptides and oligonucleotides. What are peptides? What are oligonucleotides? If you look at the biology, how they are built, the peptides are chains, macrocycles of amino acids. They can go up to 100. The border between peptides and proteins is somewhat the gray zone. When I was in school, it was 50. Now we write 100, but it doesn't really matter.
Those are similar molecules, and we can do them synthetically. That's where Bachem and other colleagues push the boundaries. How to do that? We can go up almost to 100. They are natural molecules, so they are in your body, and they regulate many physiological processes. That means there's not a lot of side effects. Small quantities are necessary to have a substantial impact. So they are good drugs, very good drugs. We also produce oligonucleotides. Oligonucleotides are small fragments of DNA or RNA, and they are typically used for gene silencing. We use them as antisense oligonucleotides. That's what we synthesize, or short interfering RNAs. Now, why those two classes of molecules? And that's at the bottom of that slide. They are chemically modified, typically, the peptides and for sure the oligonucleotides. And that means they're important elements that are based on chemistry. And they're complex molecules.
They are within the largest molecules that are manufactured synthetically. And we want to do challenging tasks, important work. We want to have a high barrier of entry for competitors. That's why we are in that space. And they require specific knowledge and specific equipment. So not everybody can just walk in and say, "Hey, I'm going to be a peptide company," or "I'm going to be an oligonucleotide company." That's why we like this space. And I speak for everybody in the company and also the stakeholders. We are very fortunate and happy how we are positioned. And we want to stay there. That's where we are, and that's what we are. And now those are the numbers behind that. You see a healthy growth. The green line is the revenue. Really, really nice growth in the 2020 and 2021 years. Not unlike many pharma services companies.
Those were also the COVID years, but we mainly see as a causal relationship that we had capacity we could grow in. We got the contracts, and we could relatively simply ramp up by day shift and use this capacity efficiently. In the last couple of years, capacity got a little bit more tight. We reacted. We put shift work in. We increased the utilization over the seven days, but it was a little bit slower, and going forward, we hope that we can ramp up again with additional capacity coming on stream. The bars you see are the half years, and you see quite a big difference between the first half year and the second half year. We have, especially over the last four years, we have reoccurred this situation. There are many explanations about it.
Looking forward, I hope we can level that out a little bit, and that will help us operationally and also for the financial result. Kuno mentioned it. We are fortunate. We have contracts. We are working in important indications, and we took the liberty to list what we feel are game-changing innovations in the pharmaceutical market over the last couple of years, and clearly, the last one you see there at bottom right is those gut hormones or weight loss hormones that are used to lose weight but have many positive effects on other organs too. And The Economist had a cover running, the second Economist cover in the last two years. They said those are the everything drugs because they work on so many different organs and are so beneficial for all of us, so a very interesting space, and of course, if you're in there, you feel that.
You feel that push or pull from the customer. And if you look at that slide, the horizontal, the middle slide, that should indicate that our short-term and long-term is, of course, dependent on the success of that class and takes this energy that's in the market and wants to formulate how we go forward. And if you look at the market dynamic at the top of that slide, of course, there is an urgent need for additional capacity. And we feel that. We know that our Building K needs to come on stream. Customers and patients are waiting. We know we can sell more if we get it ready. We work on that. And we also expect that more people are interested in that space. We want to prepare ourselves that good players are already here, but more will come.
If you look at the long term, how we react to those challenges, we want to be the ones who innovate how we produce those molecules. We don't think we are already at top performance of chemical synthesis for those TIDE molecules. We invest our own money in process R&D to improve how we manufacture those peptides. And we also feel that a lot of people want to near shore. They want to have their molecules produced where they are producing. And we think we can profit from that process. The imperatives in that respect in the short term, we execute quickly on those capacity expansion, and we need operational excellence. As I talked, we run more shifts. We need to go deeper, better understand how we can get our assets maximally used and reduce costs and quality-related costs. In the long term, we want to remain number one.
We want to push green chemistry. We want to push process R&D because we believe that's how you're going to win the future and how you're going to make this field even better. To give all of that a little frame within the company, we came up with three operating modes. I start at the top, second column, CMO. That's just producing the same material maybe for a year on the same piece of equipment. We are also accepting the CMO space that other people come to us and bring the recipe. A couple of years back, that was not our prime business model, but we see value in this kind of manufacturing. We're educating ourselves and working together with customers to really put that into the Bachem mix. Then the middle pillar there, that's the CDMO business.
That's where we develop processes maybe together with the pharmaceutical companies. And we run them somewhere in a pilot scale infrastructure in campaigns a couple of months, and then they go out. And the bottom layer is the trailblazing CDMO. In a way, that's our process research angle. There we want to improve. We want to learn. We put that in processes, hardware at small scale, and then use that for future manufacturing. Something we are all excited about, and it's an important value creation for the future. For this slide, you guys need to see me as the COO. Those are operational things we are tackling as we grow, as we go along. And very successfully, we implemented a network strategy.
We kind of wanted to go away from the hub and spoke model with Bubendorf as the center of the universe and say we are a network of different sites who have different capacity utilization, different skill sets, but can ultimately transfer projects between the sites, and by doing that, we get more resilience that we can have capacity on stream when we need it, and we executed on that in the last two years, and it was very successful and also rewarding. The other thing I mentioned, we do CMO. It gets bigger. More peptide is needed, so we need to be more mindful about how can we scale. It's not just how can we make it happen. It's also, can we do it for a long term? Can we do it at larger scale? Do we have the scalability in the chemical process, but also in the organization?
And there's a lot of energy going into that, and we see that we make a lot of progress on those topics too. And we strengthen the management. That's clear. With the growth pace we have, we also need outside-in knowledge. We cannot just learn everything ourselves within the organization. And we have to put more effort on CapEx delivery for good reasons because we have big CapEx projects ongoing, and we see more of them coming in the future. So this is a core competence for us going ahead. That's our network. And you see that we grow into the CMO, large scale capacity. And this network view is really for peptide manufacturing. So we see that CMO currently getting developed and growing in Bubendorf and, importantly, then continuing in the Sisslerfeld expansion, the second column.
We have CDMO capabilities all over the network, but we don't foresee that to happen in Sisslerfeld. And we want to do trailblazing globally with a strong focus in Bubendorf, where we have the highest density of peptide and RNA chemists in the world. And over the last year, we deliberately hired experienced hands and minds to help us with operations, with CapEx, and with quality because we see there's a huge demand. And we wanted to bring in people with different backgrounds who help us building on what we already have in the company. I start on the right side, Patrick Scheidecker. He's heading the quality assurance in Bubendorf, and he just came through a successful Swissmedic inspection. Then we have Michael Linder, who joined from many Swiss and international experience in CapEx delivery. He's working on Building K and all the other CapEx initiatives we have.
We have Hans van Hees, who comes after more than 20 years of pharma experience to Bachem. He joined on 1st of October, and I'm very happy that he's here. So you can talk with him and get a little bit of the experience he has. He will be a very valuable contribution to our company to help us with operational excellence and being even more successful going forward in delivering products for customers who are waiting and for patients who are waiting. And with that, I pass it on to Torsten, who will tell you more about the market.
Yeah. So what's going on in the market? I like starting my presentations on the market with this slide. Some of you may have seen it. It's an outline of peptide-based active pharmaceutical ingredients starting from the '80s to present days.
Bachem being 50 years in the business with peptides, it also reflects Bachem's history. On the far left, you see molecules, how we started out, relatively small molecules, 10 amino acid, 12 amino acid long sequences applied to treat diseases like endocrine disorders. Typical examples would be octreotide, leuprolide, goserelin. The remarkable thing about these peptides is they're still around. Even 30 years after introduction, they're still strong in the market. It tells that peptide may have a long commercial tail. They're part of our generics pipeline today. We will move a little bit on. We branched out. We improved our technologies. We introduced solid-phase peptide synthesis, making accessible larger peptides like glucagon, a very difficult molecule to produce, 30 amino acid longs. That is a stepping stone then into what everybody's talking about today, the GLP-1 molecules.
Here, represented by liraglutide that got introduced in the market in 2010 already. Not the first GLP-1. Before, there was a Byetta that received approval in 2005. liraglutide is close to 40 amino acid long and has this iconic fatty acid. That's a design feature that we now see in all other molecules that come along now. And what also means these molecules become more complex. I need better chemists to produce them. I need better processing technologies in order to synthesize them. And I need innovation also to because the early molecules we started that batch size of 10 kilograms. Now we're moving into demands for hundreds of kilograms, if not tons. More complexity, more quantities are going higher, and the patient populations we're treating are getting larger and larger. We're excited about the market.
Let's dig into a little bit into more of the details and explaining why we're excited about it. What you see here is the pipeline for peptides, the late-stage pipeline, phase two, phase three on commercial peptides, and how it grows over the last four years. There is, in 2024, when we made this analysis last summer, we counted about 1,100 peptide projects in the global pipeline. About a third is in the clinic. So that's a relatively high ratio. When we just look into this year, we had three approvals for peptides. Worth mentioning, none in the obesity diabetes market. So stem cell mobilization, autoimmune disorders, but not obesity, not diabetes. If you would look into what's going on in phase two and phase three, there we see a lot of that indication being addressed.
But overall, and this number may be wrong, we think the market is $1.8 billion. That was our assessment a couple of months ago. Probably today we go for a little higher number. It's based on our assessment and excludes the captive market, anything that is produced in-house by pharmaceutical companies. So basically, our market accessible to companies like Bachem. So an important role are these GLP-1 molecules. And this is, I think, the other important message here. It's not just a vanity play, a cosmetic thing, or it's just lifestyle drugs. There are clinical benefits that's worth talking about it. And the big pharma companies are investing a lot of money running big, big trials to show that it goes beyond just losing weight.
Losing weight is just one thing, but there is indication that these GLP-1 molecules have other mechanisms to really benefit with hypertension, with diabetes, obviously, with cancer, with Alzheimer's. Even Parkinson's has been discussed, and the more weight you lose, more benefits you get. 5% weight loss gives you already better control on your blood pressure. If you go into 10%, 15%, now we can talk about benefits in terms of sleep apnea or the prevention of diabetes or even the remission of diabetes, and these data are now being collected. They are submitted to the authorities, and I'm pretty sure there will be indication extensions being granted, which basically increases the market for these peptides dramatically, and there's always a cost, the debate on what is the cost of these molecules. Yeah, they're expensive to manufacture.
Treatment at this point is relatively expensive, but I'm pretty sure down the road, the cost will come down, and then on the other side, you get all these benefits: less surgery, less hip replacement, less knee replacement, less bariatric surgery, so that will all help to really balance this out, so I think we will all see that there's a real benefit, economic benefit also for these molecules down the road, so I use the term GLP-1 a lot, and clearly, most of these peptides, whereas liraglutide, semaglutide, or tirzepatide are actually GLP-1 molecules, but the term GLP-1 is a little bit misused. Scientifically, it's much broader. We have gastric inhibitory peptides. We have glucagon, which is not an incretin, and there is behind each of these natural products is a whole list of pharmaceutical derivatives that are being now developed in clinical research and for market.
These are the single agonists. Then you all heard about the dual agonists. This is when pharmaceutical companies are combining two molecules into one, like this GLP-1 slash GIP dual agonist. The most famous one here is tirzepatide, Mounjaro or Zepbound, now commercialized by Eli Lilly. And there are other combinations as well, combination with glucagon receptor agonists. And there's a very complicated biology behind it that is complex, but it gives you all these kinds of possibilities to feature the design of the molecules and to feature their pharmaceutical effectiveness. In the pipeline in phase 3, we even have triple agonists. And the other day, even I saw a quadruple agonist. So the combination of these polypharmaceutical design features is increasing. So this is what we know.
What is now coming now is other molecules that have an effect on appetite or on satiety and gastric emptying like amylin or peptide YY. They are being combined now as well with the GLP-1s. The most interesting molecule here because we're all waiting for phase three data now coming out very soon is CagriSema, Novo Nordisk's response to tirzepatide. It's complicated. For us, it means a bigger variation of research and peptides and peptides that primarily require synthesis and chemical manufacturing. It's good news for Bachem. If we leave a moment, the obesity and diabetes area, I mean, there's a lot of dynamics as well in other areas.
J&J has come out just two days ago with exciting news on their phase II trials with this molecule JNJ-2113, which has great efficacy in the treatment of severe psoriasis, interleukin- 23 inhibitor, great effectiveness. We see a big momentum also in peptide drug conjugates. So this is you might have heard about antibody drug conjugates. Just replace the antibody for a simpler peptide, and you might get similar effectiveness and targeting effects. So big market here. Keep an eye on that as well. And then another example would be the PCSK9 inhibitors that some of them are being peptides now. And one here a famous one is Merck's MK-0616 that could go very big as well. So it's not only obesity and diabetes. It's other indications as well. Generally speaking, there's a lot of research going into peptides again.
Pharmaceutical companies are building up their peptide discovery capabilities again, combine it with AI, and I'm pretty sure down the road, we will see more projects going into this global pipeline. At Bachem, we also have oligonucleotides, and here is a similar picture, so I'm counting about 700 projects right now in the preclinical and clinical pipeline. It's about 182 now in the clinic, and very exciting here is the hit rate, the approval rate for oligonucleotides seems to be very high. We just had this year four approvals. Still small indications, but if we dig into the data for phase two and phase three projects, they will see they're branching out into large scale or into large population indication as well, so there will be lipoprotein(a). There is triglyceride reducers. These are all in phase three.
I'm very curious to see in the next two or three years whether they're going to receive approval. I came back from the European TIDES Conference last week, and there are some exciting trends as well. There are two topics that have been discussed primarily. It's as we go from the niche indication into larger indications, we need to scale the technology. We need to be able to produce oligonucleotides in hundreds of kilograms as well. Current technology, yes, can be scaled out, but it's not really elegant. So there is a big need for innovations. And this is something when we started investing in oligonucleotides, where we said, "Okay, we want to differentiate with new ideas to manufacture oligonucleotides." And we have presented those ideas in the past as well. The other topic is oligonucleotides have been basically targeting the liver and any disease originating in the liver.
They did this by conjugating this GalNAc moiety to it. The liver is sold out, so to say. New organs and new targets need to be addressed now. They do it. A big theme here is to conjugate an oligonucleotide to an antibody and use the antibody as a targeting unit and as a carrier molecule and let the oligo then do the effectiveness. Very two important trends, and we will keep an eye on them and try to leverage that also for our business. Our goal is the billion-dollar company. I think we have a clear pathway to it. We have a strong current baseline. We reported CHF 577 million in sales last year. Our portfolio is supposed to grow at least as fast as the market. There is an organic growth here.
But what really pushes or closes the gap to this billion dollar is our large contracts that we have been able to sign, customers entrusting us with big projects, signing contracts with big commitments. And we have in total, some of them we reported, some of them we haven't. But in total, we're talking about minimum order values of $400 million. Not happening immediately. There will be a ramp-up phase. But once our Building K is running, we have a clear path to this billion dollar. And then there's a future, right? What's coming after? And here we also put some milestones, have a good story to tell. We already secured the Sisslerfeld where we are having concrete plans to build a new manufacturing site. And there will be sustained growth. How we do this? Günther can tell you more about it.
Yes, thank you, Torsten.
Thank you to all of you for coming to Zurich or joining us online today. I think after Torsten's presentation, we appreciate that the market that Bachem is acting in offers great potential, great opportunities, be it with peptides or be it with oligonucleotides, what we call the TIDES family. I am going to present to you our perspective on how we are going to meet the demands that we see in this exciting market regarding capacity and innovation. So it is quite obvious. The market is changing dramatically. We see a huge surge in demand in our products and services. And this means that also the way we make these products and services will have to change. The modalities that we are producing are moving out of the niche into large indications.
We will scale up our manufacturing, and we will enter a new era of peptide and oligonucleotide manufacturing, and to make this happen, this new era, we see four major drivers. On the left-hand side, of course, we need to expand our capacity. This means we need to invest in new buildings, new equipment, and we also need efficient and fast process development, and we need to scale the processes that we develop in R&D into operations, into production. Innovation has been mentioned frequently over the last minutes by Thomas and Torsten, and innovation, we defined as a great idea, a new solution for an existing problem that clearly creates value for us, the customer, and in the end, for our patients, so when we talk about innovation, it's fancy ideas in many cases, but they all have to generate value. That's what we understand when we talk about innovation.
Our innovation is targeted and quick and can be translated to large scale. Beyond that, we also see a strong focus in the market on sustainability. When we scale up our operations, we use much more materials. We build larger buildings. We bring in a lot of steel and concrete. It becomes more and more important that we meet our sustainability goals and also the goals of our customers. There's a strong pressure that we feel, but we are ready to meet these requirements and to take the responsibility we have in the market and also in the society. On the right-hand of the slide, you see the chemical complexity. This has also been mentioned before. We see that the molecules that are developed, dual antagonists, triple antagonists, and so forth, these molecules are getting more and more complex. We like this challenge.
We are excited about these challenges, and we are dedicated to meet the requirements of our customers. The next generation drugs are better. They are more efficient. They have less side effects, but some of them can be more complex and more difficult to produce with chemical synthesis. So in the next slides, I will give you a short deep dive into where we are with our building K. I have a perspective for the Sisslerfeld, and I will also comment more on innovation and how we translate innovation to benefit our customers and patients. So building K is a large manufacturing building that we are currently adding to our site in Bubendorf. This building will be a great step up for Bachem. It will have the largest capacity in this building. And we have other focus areas where we are also making great progress with this new facility.
We have focused on automation. So we are using cutting-edge software and control systems to make sure that we are operating this facility efficiently and reliably to ensure the highest quality of our products for the customers. Another key priority was to enhance our capabilities in closed handling, closed handling of solvents, closed handling of chemicals, and also closed handling of products, our products of pharmaceutical ingredients. They are active. The safety is also super important for us, and we have made this a priority in this project. Overall, it is clear that Building K will be a huge step up for us. We have full focus on this project. We have full management attention, and we are dedicated to bringing this capacity online safely. These are some real pictures from our building.
You can see that we have finished construction, and we have finished the installation of the equipment and also some utilities, some infrastructure required for the first manufacturing unit. This is a quite complex project. We have footage of something like 15,000 sq m in this building, and we are building it out with high-tech, cutting-edge technology, high degree of automation, as I mentioned. And there are two other complexity drivers that I would like to highlight briefly today. The first one you see here on this slide. This is an illustrative image. And what we want to say here is that on the left-hand side, you see a simple representation of what we planned to build originally. So four years ago, we started this project, and at that time, this dramatic disruption in the market had not happened yet.
So we were planning a building in the pre-GLP-1 era, so to say. We planned a building that should be able to deliver many different projects, as you can see here, small projects. And we also planned to build this capacity in a staggered approach over several years. And then the market changed dramatically. And we redesigned the layout and the scope of this building substantially. So on the right-hand side, now you see that we are building a large-scale facility. There will be fewer products. But we are building all of this capacity simultaneously. So the key message is we have changed the scope due to the new market demands, and we are building all of it at the same time. This clearly adds complexity for us. We had to go through a learning curve as an organization, but we have addressed this learning curve.
We have brought in new talents, as also mentioned in his presentation. We have added skills, and now we make sure that we are ready to get this project over the finish line next year. This is another graph where we would like to show the second complexity driver that we see in this project. As mentioned, we are building several manufacturing units. Here we call them A and C on the left-hand side of the slide, and we are now ramping up these manufacturing units in a staggered approach. The first unit, unit A, there we have construction completed. As you have seen on these pictures, the building is ready, construction is finished, infrastructure is available, tank farm is built, and the equipment is installed. Since Q3 last of this year, sorry, we are in Commissioning and Qualification of this unit A.
Commissioning and qualification means that we are now bringing all of that together, and we are bringing this capacity online. So we have a building, we have infrastructure, we have equipment, we have control units, we have software, and all of these systems are now integrated and tested to make sure that this system operates and delivers as we expect it to do. This commissioning and qualification is progressing now, and our goal is to have a transition into the next phase in the second quarter of next year. The next phase is manufacturing of technical batches and execute process validation. Safety is our key priority also in this project, and especially in the current phase where we are transitioning from where we are ramping up commissioning and qualification. This is the phase where we also bring in solvents into this building, where we bring in chemicals.
Safety is our top priority, and this is also a clear expectation of our customers. So we are driving this project full speed forward. One unit after the other is constructed and commissioned, and safety is our priority number one in this project. This brings us to Sisslerfeld. Sisslerfeld will be the next large step up, the large expansion of Bachem. As we have heard, we have acquired a greenfield in the Sisslerfeld of substantial size, 15 hectares or 37 acres. We are on track to launch manufacturing in the Sisslerfeld at the end of this decade. Our goal is to build a 100% focused manufacturing site, and the scale will be most likely larger than what we are currently building in Building K.
We have developed a site master plan, and we are working on a site development plan together with the authorities and the communities, so we are preparing for filing first building applications. On the right-hand side, you can see that this site has substantial potential for additional capacity. It is located in the Swiss life science cluster here in Northwestern Switzerland. It was a deliberate decision to buy this land here. We have excellent service partners. We have customers in the area, and we also have access to talent from different countries, so these were the main drivers that prompted us to stay in this northwest Switzerland region, and another positive aspect is also that this land is in an existing area that is already used for chemical and pharmaceutical manufacturing.
So we can realize synergies regarding infrastructure with our neighbors, and this will help us to reduce investment costs and to speed up the whole project. So when we think about how can we address this exciting demand that we expect in the market, where we are sure that this demand is already here and it will grow even more, how can we address it? Of course, one solution is to build more larger reactors and add more people. But in our opinion, this is not the whole picture. We think that maximizing reactor yield is a key second aspect that we need to focus on. As we have heard and as we have seen, molecular complexity is changing. Complexity is increasing. This is a key influence factor here.
We also see that quality of starting materials is super important to manufacture these very long, very big molecules with the chemical synthesis. And of course, the reactor volume. But then we also see equipment innovation is key, in our opinion. We are dedicated to innovate, to bring in new chemistries, new technologies. And of course, once we have these systems available, we need to operate them. We need to have full focus on operational excellence. And Hans van Hees is a global expert in that area. Innovation at Bachem, as I said, means a great idea, a new solution to an existing question, and it has to generate value. We need to be able to translate these innovations into real value at large scale. We have built over the years a large pipeline of technology innovation projects. Currently, we are running more than 40 of these technology innovations.
Approximately one-third of it we ran in partnerships with customers or with academia or pharmaceutical companies, and the rest of it is driven by our own financial means, our own investments, and our own resources. Over the last years, we have been able to have several examples where we translated these innovations into application in manufacturing. One of these examples is continuous chromatography. I have another slide to give you more detail on that, but I would like to emphasize that we are the first company globally to implement this technology. We are manufacturing large-scale peptides and oligonucleotides already with continuous chromatography, and all chromatography systems in Building K will be able to run continuous processes, so this is a clear example that came out of this pipeline, and there is many more of great potential. This is my last slide.
With that, I would like to highlight two examples of these technology innovations. On the left-hand side, you see an example from the upstream part of our processes. So here, we are synthesizing the peptides or the oligonucleotides. And we are using this tag-assisted synthesis as a new way of doing that. Also here, we are the global leader. We are the first company to apply this technology on larger scale. And you can see here two examples where we compare the traditional technology, SPPS in dark blue, with the solvent consumption of the new technology in light blue. And in both cases, we have been able to reduce the solvent consumption significantly by 60% or more than 70%. So I think this is a fantastic example. We are applying this at large scale, and we have great solvent consumption reductions.
And the example on the right-hand side, I mentioned already a couple of times, this is the continuous chromatography. This is a technology that we use in the downstream part of the process, so the purification of the products. And here also some real data from a real use case where we have reduced also solvent consumption from the batch mode to the MCSGP mode by approximately 70%. And we are committed to implementing these technologies. We are driving these technologies, and Building K will house many of those, and it will be additional capacity, but also new cutting-edge technology with focus on automation and closed handling. So this concludes my presentation. And with that, I hand over to Alain to show how we are going to realize these investments.
Yes, so we heard a lot about the exciting market on the demand side.
We heard a lot about that we need the capacity to meet that demand. And that's why my colleagues from the CEC knocking on my door, "Hey, we need money." And where do we get that money? Right now, we see the big projects is Building K in Bubendorf. We talked a lot about now. We also have Vista in the San Diego area in the U.S., where we also increase in capacity right now for the future. And then we also have Sisslerfeld, and you see there is an overlapping time in the next few years where we need money that we can build capacity to meet the market demand. How do we get that money? It's, of course, first, it's operational cash flow. That's also important that we have a good margin, that we have an operational cash flow to support that growth.
But we all know it's not sufficient when we look at our plans for the future CapEx capacity increase. Then we have customer financial contribution. You've seen that last year. You will also see this year that we have that contribution. It significantly amounts where customers give us money to increase and have a better pace on the capacity we do. It's their financial support. It will also be a huge part for Sisslerfeld. So we said, if we want to go to Sisslerfeld, we need a customer who financially contributes to that CapEx. But we also want their already commitments for future supply agreement. That's an important factor for there. And then there is another option right now. It's a debt bond instrument, which is under review. We have many discussions now internally, but also with banks or other third parties that we can get that money.
Kuno mentioned that the early stage finance is not the problem. I would say, yes, I have not sleepless nights for financing. I have more sleepless nights. Which options do we take? What's the perfect match right now? What do we need and what's a good fit for the company at the moment? And then we always have, of course, smaller project maintenance, which is just the ongoing business replacement and compliance stuff that is ongoing. Those are the major projects. Just to give you an overview, don't try to match numbers behind these arrows with timelines and amounts, please. It's just illustrative, but that you have an overview on where the exciting ride goes to. So Marie, Thomas, back to you.
Thank you. All right, there's the strategy slide again. I think everybody has seen we have measures in place for the short term.
We know what we are doing. We are very focused. And we have good plans what's ahead of us. We are optimistic and at the same time realistic that we need focus. And focus also means that you have to say no to many things every day and just keep going to make happen what's possible for the company, for our customers, and for the patients. And that is what we presented in August for the half year. And it is the same slide. We don't give a new update. We see mid- to high single-digit growth in 2024 and a stable EBITDA margin. And our big goal is to make this billion in 2026. And with that, I guess we conclude the presentation. And I want to say thank you to everybody who was involved in getting this to happen.
It's a lot of work, and it was relatively smooth and seamless. So thank you all who worked on it. Thanks for the speakers and, of course, for you, for your attention and that you came here to Zurich in this nice Zunfthaus. For me, it was a great time, and I'm looking forward to questions and answers. Daniel, do you want to say something? I hear I see others.
I wanted that they clap now, actually.
The work isn't done yet.
So if I can have the speakers up, please. All the speakers up, please. And I was going to say the work isn't done yet. So let's have an hour of Q&A, right? That was the fun part. So Yoshua, maybe you have the mic. Okay, so we have Yoshua here in the room with the microphone. So if you have questions, please do raise your hand.
Raise it visibly. There are some highlights here that they don't blind me, but they make it a little bit more challenging, and I saw another one over there. And also, if you are online joining us via Zoom, I already have seven questions. There's a Q&A function. Write your question into that Q&A function, and we'll try to weave in questions from the virtual audience. Is that the right word? I'm not sure. The online audience as we go along. First question.
Thank you, Daniel. I love the tech. Slide 23 in Building K. I mean, in the past, you talked about phase one. Is that the phase one or the whole building? Just to be clear.
Yeah, so we have realized that this naming of phase one, two, phase three, and other phases, this was confusing to some people within Bachem and also to some people without Bachem.
So we have now changed and re-updated this convention, this name convention. This slide is that the first manufacturing line, unit A, is in commissioning. Other lines are from commissioning to technical batches and process validation in the second quarter with the first line. And the other lines will follow. So building K, it's complete. Yeah, so also here, I would like to ask you not to read too much details into this illustrative picture. What we really wanted to say is there's different lines that will come online in a short period of time. All of them online same day, same month.
Hello, last question.
Don't you think, I mean, when I read this slide, the one building starts 2026, when it only starts maybe late 2025 commercial, that it's a bit very big hockey stick in 2026 because it looks like 2025 is a bit position for 2025, but yeah.
Mentioned it's our target to reach the billion in 2026. It's correct that a lot of things need to fall into place, but we have plans and we try to execute according to those plans.
Yes, hi, it's [Fin Schaessler] from Deutsche Bank. Thanks for taking my questions. Again, back to the slide 23. You said we should not read too much into that, but it's of course a bit tough for us. So I'm interested in the timing that you put on the unit A. So you said you began in 3Q. You expect to move into the next phase into 2Q.
These little blocks that you put, is this always sort of the same length that we should expect for each individual step? Ask the other way around. If we sort of try to extrapolate that into 2025, it's like it's already said. Unit A essentially only begins probably in early, sorry, in late 2025. And then connected to that, the three lines that you spoke about, are they all roughly the same size? Or should we think about it as sort of a third of the Building K being done then?
Yes, thank you. Good question. I think this is important to have more granularity on these topics because I'm sure it's of interest for many people. I think the first question was, are the blocks representing equivalent timelines? And the clear answer.
So it is important to. I would like to ask you to read thi s as processes. Am I still?
Can we just make sure that the mics are on? Also that people on the online audience can hear what's being said.
Our intention is to show that this is processes for each of these steps in the project. It is not so simple that we could say, okay, on March 31st, this period ends and on April 1st, this starts. But it's a continuum. It's a process. It is a highly complex building, as I tried to show you also in these pictures with the footage of 15,000 sq m. And we are driving the buildout of these units forward in parallel. And some units are more advanced than others.
So these blocks of construction, C and Q, technical batches and process validation, they do not take the same amount of time.
And with the second question, please, can you help me again? What was this? Where the unit A, B, and C are all roughly the same size.
Yes, thank you. Now also here we have really an illustrative concept in this picture. The units may be different in size, in output. And we have the largest capacity in this building planned for peptides, but we also see some oligonucleotide capacity in this building. So lines are different. Scale is different. And also the technology that we install is not exactly the same for the different lines.
Okay, that's very helpful. But I understand that you say the different blocks along this chain are not necessarily the same length.
But between commissioning and technical batches, indicative, which one would you say takes longer or takes less time? How should we think about it?
Yeah, so I think you can see in the timelines that we've given that this commissioning and qualification is quite a substantial effort. As I tried to explain before, this comprises many various activities. So it's virtually thousands of tasks that have to be completed to bring this capacity online in a safe manner. So we are introducing our solvents. We are introducing chemical reagents. This is potentially hazardous. And we have hundreds of people working in this building. So one key focus area is to have safe operations, clear processes, clear responsibilities, roles and responsibilities, and to make sure that all systems in this building, infrastructure, so vacuum, heating, cooling, water, energy supply, gases, liquids, and so on, all of this has to be fit.
And we have to demonstrate that it is safe and can be scaled up and safe and operated in a safe manner. And all of this has to be integrated with the control systems that we have in this building. So it's a quite complex exercise we are going through. And it's not so that it starts on one day and ends on the other day. It's a process. It's thousands of activities. And the timelines that we have given on this slide, we are really meant to give you an idea of the scale and of the dimension we are talking about in this building.
Okay, thank you. That's very helpful. If I can maybe just squeeze in one last one.
So I was about to ask whether, if you're successful with the first line, that we can sort of take away from that, that probably line B and C, the commissioning and the technical batches, would likely be the same. But you said there are certain differences. Or asked the other way around, is it the most difficult to get the first line to work kind of, and then maybe the other two are a bit quicker?
Yeah, I think that's a fair assumption. And Günther showed his passion and our passion for this building. And as we mentioned, we're going to go into the first unit while we still have construction work. So we need to bring all systems up to speed and also all safety measures. So there's a big chunk of work going in for the first one. And hopefully the second one is a bit easier.
People tell me with kids it's similar, but I don't know.
Maybe a short addition if I may.
Yeah, sure.
It is surely fair to say that unit A also includes construction of the building and construction of most of the infrastructure, so we have one ventilation system. We have one heating, one electricity supply in this whole building, so unit A is the biggest chunk. It takes the longest time and the largest part of the investment, and units B and C and other units will benefit from what is included in building, in infrastructure, in systems in unit A, so also here, the timelines or the size of the boxes is not representative. In reality, following units will be easier and hopefully faster to install and bring online,
so I see questions here in the room.
I'd like to take one or two from the online audience for a moment. Charles Pitman from Barclays has asked whether we have any guidance. This one goes to Günther, I think, the technical one. Can you provide guidance on your current yields across small and large-scale manufacturing? How has this evolved over time and whether our new technologies and processes you mentioned, Hiving, MCSGP, can be retrofitted to older sites? So two points. Anything we can say about yields across small and large-scale manufacturing, the differences, dynamics, and then can you apply these technologies to older equipment and older sites?
Okay. Also excellent questions. Yes, the yields. Yields are, of course, more important with increasing scale.
When we manufacture at smaller scale, let's say hundreds of grams or a couple of kilograms, the yield is typically not so much of an issue because most of the costs are accumulated with personal time, not so much capacity utilization and starting materials. This situation changes when we scale up and when we manufacture in hundreds of kilograms or even ton scale, then small improvements in yield can have a substantial impact on lead times, environmental impact, and also the cost structure, and also with repetitive manufacturing, when we gain more and more batch experience with a specific product, this helps us to improve the process and also to drive the yield upwards. So in general, yields, we do everything we can to have higher yields at larger scale, whereas at smaller scale, it's not so much a focus.
Regarding the question, how can we implement these technologies in different sites? Yes, we have developed a clear network strategy, also with input from Hans van Hees. We have clear site missions. We also have a clear plan how to transfer processes and products between different sites. To enable this process and product transfer, we need to make sure that we have similar or comparable technologies and equipment at different sites. Driving these technology innovations forward happens at a global scale at all sites.
Two questions maybe here first, Charles Weston, and then open Q&A at the end. Okay, whatever. I feel I'm talking too much.
No, no, no, it's okay. It's okay. All right.
Yeah, no worries. My questions are also around capacity and utilization. Excluding Building K, what is the capacity utilization across all of the sites now?
Or to put another way, how much growth is available from the existing network, excluding Building K?
Excellent question, and of course, and a very important one also going forward into 2025. We have additional units coming online in Building G. And we were also qualifying one of those units this year in the first half. We are ramping up shift work as we speak. And we are driving towards a better utilization in 24/7 operations in Bubendorf, but also in our American sites. I would refrain from giving you exact numbers, but we are certainly in the high teens when it comes to capacity utilization right now. And it's a question of fit to the facility too, of the projects that we are handling really fit into the existing footprint. So you're in the high teens, did you say?
Close to 100%, I wanted to say.
I'm sorry, not below 20, not below 20. Thank you for clarification
and therefore, when it comes to 2026 and Building K is obviously critical for that, does it require to hit your billion, does it require 100% or full utilization of Building K?
We are approaching this question from every angle, I guess. It requires a substantial part of Building K being operative in 2026, I would put it that way
and would you frame that as sort of full 24/7 maximum utilization there? Here I'm also thinking about 2027 or 2028 before Sisslerfeld comes on. Where else could you get your growth from?
All right, I would repeat that we are taking unit A or this A piece into operations in the near future, and then we have additional expansion steps in the Building K going forward so in 2026, it's about the first unit.
Okay, if I can just do one more before I hop back in the queue. In terms of the columns, the illustrative columns that I'd like to analyze more, the three and a half blue bars, you sort of got two blue ones and then a shaded one. Do you remember that on your slides?
Yes, I think I remember. Yeah. Do they represent different customers or are they the kind of some of them the same customer but just coming online at different times?
So this is the slide where I talked about innovations in the upstream and in the downstream technology development, right? Is this what you're referring to?
Okay, sorry. The original design of Building K and the current design. Okay, I got it. Yeah, so the original design was a more fragmented approach.
At that time, we were still operating in a business that was dominated by a larger number of small and medium-scale projects, and the design of this, the original design of our Building K was to fit these processes into this building and into this equipment. And then we saw this dramatic surge in demand in the market, and we redesigned the building, so we adjusted floors and ceilings. We adjusted walls to make sure that the equipment that we need for the new market requirements fits in this building, and we also adjusted infrastructure. So what we built now is very much different from our original plan, and on the one hand, this gave us the fact that we had the building, the shell, and the floors already constructed, gave us a head start, so we could immediately react to the new demand in the market.
But on the other hand, it added substantial complexity because we had to redesign, even reconstruct parts of this building to fit the new equipment in.
And towards the question how many customers, I think you should imagine that there are less customers in building K than what we have in building G right now. But you should not read too much into this graph we had there. It's not three and a half or something.
Yeah, thank you.
Over here, Rupen Boyadjian.
Hi, thanks for taking my question, Rupen Boyadjian from Finanz und Wirtschaft. I think it's fair to assume that from what you've said until now, commercial production will start only towards the end of next year. And so if there's not some sort of rather unusual upfront payment or intermediate payment, there will be no cash flow next year from the new capacity, right?
I see.
Such a stiff question. I think we presented the information we have at hand right now, and I would keep it where it is.
And you said in 2026, there will be unit A going online, like the first unit. So the other ones will come online only after 2026?
Again, I would not add any more color to it. We will inform as soon as we know more. Thank you.
The first line will be 2025, just to be clear.
Oh, thank you. Yeah.
First line is 2025. Other lines will follow.
And I think unit A was referenced in the context of 2026. The question was the growth to 2026 in that billion. We need unit A online for that. That was, I think, the point that was made earlier.
Let me take, sorry. Okay. Okay, good. Let's take another one from the online audience. Moving to chemical synthesis.
We spoke about chemical synthesis. I think this one goes maybe to, let me read it first. We'll see who it goes to. How does Bachem's chemical synthesis compare to competitors and the in-house chemical synthesis of the GLP-1 players? Could growing chemical synthesis demand mean a substantially larger opportunity for Bachem? So I think the question is, are there differences in the approach to chemical synthesis between Bachem and other companies who also do it? It sounds like a question for you, Thomas.
I think what is important to us is that we understand all different traits of chemical synthesis. We play on all those different (how should I call it?) technologies. I would say you have the liquid phase, you have the solid phase, you have the hybrid approach, you have the Hiving approach.
And we really work on all of them, and we push all of them into a better future. And I wanted to give this example for illustration. I remember anecdotally that we got a request once for the liraglutide or a similar molecule, and all our chemists put their hands over their head and said, "This is too complex. We can't do it." And that changed over the 30-something years that I'm working in the field. Chemical synthesis is now capable of doing that. And that's the good work of all the R&D folks in Bachem, mainly, but also in the academia and worldwide. We really push this field of chemical synthesis ahead. And as we see, it's important because you can make better molecules using chemistry than just recombinant manufacturing. And that was the question whether we are additional business in peptides is, of course, good news for Bachem.
I mean, I think that was also in there.
Questions in the online audience here. All right, Laura Pfeiffer.
Laura Pfeiffer from Octavian. I think it was on slide 19 that you mentioned a minimum of this 450 million annual sales at peak that is contracted. And I assume this includes customer A, B, I think the Lilly Oligo project, and then I guess a couple of other non-disclosed projects. So can you maybe indicate how much capacity you have still available in Building K? You know, that is still open to be filled. And also related to that, how much flexibility do you have in upsizing your existing contracts if needed?
So I guess there's two parts. Maybe the commercial, if there's anything to add around the contracted volumes and then how much capacity is still not contracted. Second question.
When we decided to build Building K, one of the biggest worries to me on the commercial side was to fill the capacity, right? Find customers for this big, big project. And the original plan was always, you know, to move slowly into it, you know, build the first unit here, then go next project comes in. And what really happened is, you know, we were rushing into this building simply because the market demanded it, right? So we've been able to sign a couple of contracts. I would like to remind some of you that when we're talking about this GLP-1 area, that this is a relatively new area. Many of these projects are still in clinical research, advanced, phase three. But still, there's a reminder, you know, a remaining risk, right? That they may not come through all the way.
Even though, you know, I think, you know, we're very bullish about it, you know, and people are losing weight. We see these additional benefits. So it's a fairly safe bet. So when we're talking about capacity, you know, we try to lock in a customer in the sense that he gives us the commitment so that we can plan and make these investments. But, you know, usually you operate with minimum order quantities or order values. And those are below the maximum capacity, right? So it's not, you're not getting a contract, you know, for full capacity. So there is always a little bit of flexibility.
Is there another question, Laura or? Okay. All right. Then over here.
Thank you, Charlie Southern from Devon Capital. I can marry slide 19 to slide 23. I think it follows on from the last question.
You've got long-term contracts at around CHF 400 million, taking you, I think if I read slide 19 correctly, to your two or just over your CHF 1 billion guidance in 2026. And then you've got slide 23. And you said in the past that I think building K has revenue potential equivalent to about the 2023 revenue base, which we're going to take as about CHF 550 million. So putting those all together, I guess it would imply quite a high utilization of building K by the end of 2026, which would presumably mean that at least units one and two would have to be substantially utilized. I just can't square all these. I can't square this circle.
So maybe you could just try and help us be a bit more specific about how 19 and 23 fit together and how it relates to how you've spoken about Building K's revenue potential in the past. Perhaps that number's changed. Thank you.
Maybe to ask me because I think there might be a misunderstanding with the CHF 450 million being all between now and 26. You said something around. No, I think there's a ramp-up phase, right? There's several contracts and they come staggered. And yet as Günther said, you know, a big chunk of the investment is in this first phase A, right? Where quite a bit of that capacity will come online and that will help push us and close that gap. I also would like, you know, to remind you, you know, Bubendorf is not the only site within our network.
We have sites in California that we are also investing, you know, building up our shift systems and they will contribute too. And then there's also the base business that we said at least should, you know, grow with the market. And of course, my ambition for my team is always that we beat the market, right? If the market grows 10%, my expectation is Bachem grows faster than 10%. So our existing business, you know, outside of this big opportunity is supposed to contribute there as well. So throughout the entire network, I'm expecting come 2026, good utilization, high utilization. And a lot of things need to come together to close this gap, but there's a pathway.
Okay, so the high utilization that Thomas mentioned earlier, there's still scope for, I guess, low single or double-digit growth on an organic basis regardless of Building K.
Yeah, maybe I was not precise enough. I was talking about the existing capacity. We are trying to utilize more fully in the Americas and also in Switzerland, being at Vionnaz, Bubendorf, and there's always uncertainty in the business. It's a little less lately for peptide manufacturers, but we will see what happens over the coming years.
Good. For the questions here, I see one from Charles. I'll take one from the audience while we bring the mic over. This one comes to, this was a financial question, and it, I guess, comes to Alain. This is from Paul Knight. We understand from other companies in the industry that $1 of CapEx can generate $1-$1.7 in revenue.
Is that possible in your view?
So the CapEx translating into so when we plan an investment, we also go for the one-to-one. When we do the business case, that should also be in our case. The 1.7 you said, I think that's high. I would say we should get at least one Swiss franc per one CapEx. But it also depends on what you produce there, if it's small, large to large scale. But that's for sure a good rule that we apply.
Okay, yeah. Thanks for taking a couple more questions. Just on the external environment, you mentioned nearshoring being one of the drivers within the industry. Are you seeing that sort of specifically through contract discussions catalyzed potentially by Biosecure or in general?
Yeah, it's always really complicated to see what's causation and what's correlation.
So sometimes you kind of wonder, but we certainly have seen requests for proposals for topics or areas where we have not seen a request over the last 10, 15 years. And I would have thought that that has something to do with the Biosecure Act. And that is not necessarily all in large-scale manufacturing, but also in the earlier stage.
And the second question on the external, in terms of potential tariffs from the U.S., has the board had any discussion in terms of how it might impact your business or how you could mitigate this?
Of course. I mean, it's something that's out there and it's probably still close to the election rhetoric we had, but it's a serious uncertainty for our business and we will look into it and we try to mitigate as good as ever possible.
But if you know what happens, then please let me know. I'm just working on scenarios.
Okay. And then one last question on financing, please. In terms of,
you know, the board's been conservative, should we say, in the use of debt before, is there some sort of maximum level of gearing that the board would be happy with? You can ask the board. No, no, jokes aside. Where I would feel comfortable still is at two and a half leverage. And when I do my calculation, this should not be a problem.
Thank you.
Yeah. We'll stick with one or two questions from the online audience for Alain. Take two more, I think. Your first was just on this one. When might we hear more about the ongoing review of using debt or bond instruments? So anything you can say to that.
The other question is around how do you think regarding implied margin accretion of Building K, I guess, versus older, less automated facilities.
So on the debt/bond, as soon as we know more, as soon as we have secured contracts, we will let you know, of course. But as we said, financing itself is not a problem from our side. It's more the how and what is the best fit for the company. And on the margin, we see now we suffered a little bit. It's the growth has a certain impact bottom line. We have to hire people. But in the future, when Building K is running, we see clearly the increase also from operational excellence, from the automation that has been mentioned a few times today. We see that the margin should go more than just the floor of 30% we announced for 2026.
See Daniel Grotzky here. Any questions from this side? No. Okay. And we got the fancy guy.
Okay. Okay. Thanks. Two questions towards the end of the decade. So oral peptides, the consensus in the industry is roughly 25%-30% of the market volume in tons will be oral and the rest injectable. And oral for you would be, of course, very interesting because you need more drug substance. So that's the first question. What is your view? Is that a realistic quarter or a third? And the second question towards the end of the decade, you haven't talked about small molecules at all. And we believe that it will be 40% of oral pep, 40% of all oral GLP-1s will be small molecules and 60% or roughly 50-50 oral peptides. Is that something you can agree on? I'm sure you have done some thoughts on that. Thanks.
I think this one goes to Torsten regarding the market, small molecules. Maybe you have a—I have an opinion one. Maybe Torsten and then Torsten can add and have a debate.
Okay. Maybe we start with oral peptides and small molecules. Yeah, small molecules are in development. You know, I'm aware of at least two in phase III and developed by big pharmaceutical companies. You know, they say in the public domain that one will not substitute the other. So they see a future for all the modalities, right? You know, the peptides have the big advantage there. They're right from natural products, right? So we all have these hormones that are pharmaceutically enhanced, right? Small molecule is a small molecule and it's a one-trick wonder. You know, the ones I know address the GLP-1 receptor.
But the beauty with these peptides, the dual, triple, quadruple agonist is you can address multiple receptors at the same time. So basically, fine-tuning the pharmaceutical properties. I see there an advantage, but clearly there are markets where you don't want to have a minus 20 or, you know, five-degree cold chain. You know, as small molecules might be easier. And also, you know, once we are thinking really long-term, you know, OTC products, you know, I guess they would be orally delivered and not injected. So yeah, we keep an eye on it, but we can focus pretty much on what we are supposed to do well. And this is the chemical synthesis of peptides.
So that was the tough question. The easy one is oral peptides. And Torsten, you had a nice slide there with the PCSK9 and the IL-23 antagonist. And those are both orals.
So to me, it's quite fascinating to see how companies like Protagonist Therapeutics bring oral peptides successfully to the market. If we look, and they use specialized amino acids, and I think there was also talk that they use this AI-induced design, and that seems to pay off. They published. They have an investor call today on IL-17 antagonist. They have first results there. Should also be an oral. So tremendous potential for peptides to replace infusions or injectables. And I think this is fascinating and helps patients to take their drugs more conveniently. So I hope this is going to come to fruition and gets approvals and then a good market uptake. I think Torsten wants to, maybe one remark to oral peptides too.
Yeah, you can design peptides in a way so their bioavailability goes up, right? But the development of injectables is not at the end, right?
You know, companies are looking into sustained release formulations into one-monthly injections. That's going on. You know, when you looked at the slide, you know, I pointed out three approvals, you know, in peptides this year alone, and one is a small company called Ascendis. They are developing, you know, degradable hydrogels. They pack, you know, the peptide into a cocoon, you know, so that it can act longer, survive longer. And these are the technologies I think, you know, the big pharma companies with all the big products, you know, having a very close eye on it. And again, it's not the end of the peptide injectable technology.
Yeah, you're right, Torsten. That's a very exciting message also we have to position. We see a lot of people getting interested in the space. And I think it's not a surprise if there are such successful products out there.
It opens up fantasy and ideas in many boardrooms or scientific labs.
Carla Bänziger.
Carla bänziger from Vontobel Asset Management. I have a question related to innovation and also GLP-1s. So maybe on the large scale, do you think you have room for innovation in the upstream process compared to competitors? Or is this not possible because it is a strict process that you have to adhere to?
If I may take this—no, go, go. I think we definitely have room for innovation and for further improvements in the future. This example that I have shown with this tag-assisted synthesis is a new approach. It has been developed over the last years. And now it has reached maturity so that we can apply it also on larger scale.
Another example that I can give you is that even details like the solid support for solid-phase synthesis can make a huge difference. So those of you who are interested in the chemistry and technical details, when we manufacture our peptides, we frequently use a solid support where we build the peptide stepwise. And at the end, we cleave it from the solid support. And this solid support is a polymeric solid support. And making this solid support is not easy. And on the other hand, it has a high criticality for the outcome of the synthesis. So if you have a good support, you will get a good result. If you have a poor support, the outcome can be very different. So we have decided to insource this manufacturing of the solid supports.
This is also one of the innovation projects that I've mentioned, one of these more than 40. And we have learned over the last years how to make this resins. We know how to do it. And we are in the process of scaling up this manufacture of solid supports in our Vionnaz site. And we will implement these resins for large-scale products in the near future. This is another example, and there's many more in the pipeline.
Maybe if I listened correctly, you also asked, can we always implement that immediately? And that's not the case. You need to be patient. We are all excited about what we are doing in our labs, and we would like to throw it on everything. But typically, we kind of get accustomed to what we have, and then we bring it in for the new processes.
So an add-on here.
So is it possible that you have a product you're producing and then at some point you bring this innovation into this product production, or is it only when you get a new project that you can implement it?
If you want to introduce it in something that's already approved by the regulatory bodies, you have to go the regulatory pathway. And that's possible. But those C&Q colleagues are typically in high demand and not always available.
I'll bring over the mic to Laura Pfeiffer back there. While we do that, one question from the online audience. We spoke about amylin. So maybe we start this one off with Torsten and then anyone chime in who wants to.
Can you talk through your capabilities in history with respect to amylin production, given this area is typically more complex than GLP-1 manufacturing and whether this is an area you are involved in? Anything we can say about producing amylin?
Yes, these are complicated molecules as well, right? They're not new. I mean, Günther and I and Thomas, we know these for 20, 30 years. You know, these are natural products. They have been studied a long time. What is being discovered now is their use in weight loss. There are similar. You have similar chemical complexity, require chemical synthetic methods to get to it. They have, you know, the Amylin, most of the things I've seen, they are a little bit cyclic, right? Very small cycles with a long chain on it. 30, 40 amino acids. So something that requires quite a bit of know-how.
I'm glad we have, you know, 2,000 employees that really focus on TIDES chemistry and TIDES manufacturing. I think this is one of the advantages we have. It's not just that we are waiting for a customer to transfer a process to us. We have customers that come with a sequence, you know, and it may be as complicated or, you know, difficult, you know, as it may be. We have the manpower and the brains in order to develop these processes that at the end of the day are scalable and also cost-effective.
So thanks for taking my question. So just on the Sisslerfeld expansion, a little bit longer term. So how comfortable do you feel planning now for this next step of large-scale expansion? And how much visibility do you currently have already that you will be able to contract this quite significant capacity in the future?
So do you already have kind of initial feedback or interest from the industry? And then maybe related to that, I think it was Günther who mentioned that you might even put larger reactors or capacities into that building. So a little bit more details would be interesting to know also, you know, in context of the whole industry-wide capacity build-out that big pharma and also your peers have announced.
Thank you, Laura. For us, it's paramount that we have somebody involved deeply in the Sisslerfeld project to really kick it off. That is where we stand today. And we're reasonably optimistic that this could happen. And as soon as something materializes, we will let you know. And the second question, larger reactors. Should I talk? No, do talk to that. Just the reactors.
So I think what we are aware of is that this surge in demand is not at the end yet. We expect that the demand is continuing to grow over the next years until the end of the decade and beyond. And we are aware that we need to meet this demand and to produce these products economically viable, sustainable, safe, with highest quality. And we are preparing for this step-up. We are preparing for this challenge, for this opportunity. And it's not only the reactor size or the reactor volume that really determines the output. It's also the integration of such equipment into a facility, automation, control units, operational excellence. All of this has to come together to create one system that is highly efficient and can generate high output on a daily basis, day after day after day. So the reactor volume is not really the only determinant.
are many factors that are influencing the outcome of such a facility, and we are preparing from all perspectives to build such a facility as soon as we have the partners that we need for such a strategic project.
I'll take one question here from the online audience. This one goes to Torsten regarding the demand side. Can you talk through contract momentum in Q3 2024 and year to date compared to last year, particularly for peptide projects? So how's the contract momentum? So discussions with customers, contract demand.
Yeah, I mean, this goes maybe ties into this question of Sisslerfeld. The time is now, you know, to kick off a project like Sisslerfeld. There is the opportunity in the market. The market is growing. There is still, you know, customers are searching for capacity.
And so you may assume that, you know, we had this idea of kicking off discussions with our big customers about Sisslerfeld. So this is happening. And I think this is where, you know, contracts, you know, as soon as we have them, you know, we will report on them. That's where I would see a next, you know, series of contracts, you know, that are, you know, in the size that we would disclose them. And there are other, you know, contracts. You know, we talk to our customers on a daily basis. My team is 100 FTEs, basically on daily contact with customers. And we take also small projects, you know. Not all the sizes, you know, in our network, sites in our network, you know, are talking about, you know, multi-ton quantities of peptides. We have smaller sites. We even have sites that do non-GMP work.
My goal is always, you know, to, you know, utilize the entire capacity, the entire range of capabilities we have. And that, of course, includes oligo as well. Any further questions? Yeah, there we go.
Hi, [Tommy Henslick] from UBS. Can you talk a bit more about the oligonucleotide pipeline? The Lilly contract is a big contributor to the CHF 450 million. I think you said CHF 100 million potential before. It seems these are in early phase right now. So can you give an indication of how this is progressing since you made that announcement?
I'm quite happy how our portfolio of oligo projects evolves and grows. So we see multiple technologies in there. The contract you mentioned here is at the heart of that, is a process technology that we helped, you know, to bring to GMP level, right?
And in return, you know, we get certain commitments from the customers. I don't think, you know, we have revealed any details in the past. But yes, we are in this ramp-up phase where we use this technology to manufacture oligonucleotides for Eli Lilly. Follow-up question?
No. Okay. Any other question here from the audience? Otherwise, I'll take one. Regarding Sisslerfeld, but going beyond that maybe a little bit. And I think I'll throw it to Thomas and Alain. Demand seems high and visibility is also strong. Why not accelerate the Sisslerfeld project timeline? And then also, given financing CapEx is an ongoing consideration, would management consider temporarily maintaining or cutting the dividend?
I was thinking about the first piece. If there's an impression that we slow it down, that would be mistaken or bad communication. We go appropriately quick, and we certainly are excited.
There was a final dividend. Thank you. The dividend. I mean, the dividend is low. It's at the end, it's a decision of the shareholders, and that's where we are. And so we propose something, and the AGM is deciding if there is a dividend or not.
Any other questions from the audience here? As I'm just browsing through the feedback. Go back here. I'm just checking through the online. Is there anything we might not have already covered by an audience question?
Something we haven't touched on is the opportunity in generics with a couple of imminent off-patent GLP-1s, but also just longer term once some of the really big existing ones go off-patent. How do you see generics contributing to your sort of mid to longer term within the mix?
I think we alluded to the fact that peptides stay in the market for a very long time.
So some of the innovative products are now generics, and we are very happy with that offering. Right now, however, innovative products are probably a bit more front and center in our planning and thinking.
Okay. If there's no more question here, I'm going to take one more here from online, which goes to, and we haven't spoken about it necessarily in detail. Can you discuss the manufacturing process with respect to Bachem's contribution to produce dual and triple agonists and whether Bachem is only contracted for one component of peptides, either for dual chamber devices or co-formulations? Probably we're not talking about individual customers, but maybe general. What we know about what we can do synthetically, dual and triple agonists.
Yes, that's right.
The chemical capabilities that we have, the technology, the know-how that we have enables us to produce even the most complex molecules that customers are able to design or decide to move into the clinics. So these molecules comprise, let's say, 20, 30, 40, even up to 50 amino acids. And these are the projects we are working on. And so far, we have been able to meet the demands of our customers, and we have been able to produce these compounds with chemical synthesis. I hope this answers the question.
I think it does. I'm happy, but there's nothing out there. Okay. All right. Any last question here in the audience? Just checking out. All right. Did you see that it's snowing out there? Is it snowing? Oh, it started snowing. Perfect. I think I came with public transportation today.
I have summer tires on the other car, so that's why. All right. In that case, thank you very much for your questions. Thank you for the engaged conversation. We have an Aperol Spritz, which hopefully will be arriving soon. Please stick around if you're here with us in Zurich. Yeah, it's snowing outside, so maybe a glass of wine to warm yourself up before you go out into the cold is a nice idea. And just to wrap it up here, we'll be showing our full year results on February 27th, so also a little bit earlier than we used to. It used to be early March. Now it's end of February. The other dates here as well for you. And if you have any follow-up questions, please reach out to us. And also, don't sue us. Here's the standard disclaimer.
Thank you very much for coming, and thank you to all the speakers. Have a nice day.